Latest bank closures bring year's total in US to 140

Seven United States banks were seized by regulators, bringing this year's total of failed lenders to 140 as financial companies are tested by the recession and the Federal Deposit Insurance Corp anticipates more shutdowns.

Banks with US$14.4 billion ($20.2 billion) in total assets were closed yesterday in six US states, the FDIC website said. The agency is overseeing the dissolution of banks at the fastest pace in 17 years.

Two of the closures were in California. The assets and deposits of Federal Bank of California in Santa Monica were bought by closely held OneWest Bank, which acquired IndyMac Federal Bank this year. Imperial Capital Bank was bought by City National Corp, the Beverly Hills-based parent of City National Bank, which expanded in Southern California with the purchase.

"Imperial Capital Bank is a very good fit for City National, given that eight of its nine locations are in communities we serve," City National Chief Executive Officer Russell Goldsmith said in a statement. "We're pleased to contribute to the increased stability of the banking system."

Federal Bank was the biggest lender seized yesterday, with $6.1 billion of assets and $4.5 billion in deposits, according to the FDIC. Based in La Jolla, Imperial Capital had assets of $4 billion and $2.8 billion in deposits.

Last week, the FDIC boosted its 2010 budget by 56 per cent to $4 billion to manage further shutdowns. The total budget will increase from $2.6 billion and the set-aside for bank failures doubles to $2.5 billion over this year, according to a proposal approved by the FDIC board. The agency staff will increase to 8653 next year from 7010 this year.

The budget "will ensure that we are prepared to handle an ever-larger number of bank failures next year, if that becomes necessary", FDIC chairwoman Sheila Bair said in a statement.

Yesterday's bank closings will cost the agency about $1.8 billion, according to the FDIC statements.

US lenders are buckling under the weight of loans tied to commercial real estate, which is plummeting in value. Prices have dropped 43 per cent from their peak in October 2007, Moody's Investors Service said last month.

- BLOOMBERG